So just where is economy headed? The Fed and Wall Street economists seem upbeat about things. Are you?

I don’t enjoy writing about negative things, I mean who does, but sometimes you just have to put it out there. Our media says we are in a “recovery” incessantly. We are told that because the stock market is rising, because housing is enjoying a few signs of life (at bankruptcy prices), and because cars are selling better than the terrible rate they sold at last year, that the U.S. economy is doing well. It’s my opinion that it’s a mirage.

Let’s see: While the economy has grown at a lackluster 2% (GDP), the stock market has doubled, the Federal budget is spending about 1 TRILLION dollars more than it’s taking in, The Fed is purchasing just over 1 TRILLION dollars in treasuries and mortgages per year in an attempt to stimulate growth, and we have an aging population.

The older population, persons 65 years or older, numbered 39.6 million in 2009. They represented 12.9% of the U.S. population, about one in every eight Americans. By 2030, there will be about 72.1 million older persons, 19% of the population. A consistently older population over the age of 65 will put a severe strain on Federal programs such as Medicare and Social Security.

What worries me the most is that while some people have saved adequately for retirement, between one-fifth and two-thirds of today’s seniors haven’t saved enough, leaving them to rely heavily on Medicare and Social Security — programs that, along with Medicaid, now account for about 40 percent of all Federal spending. The Baby Boomers are past their spending years entering retirement and growth in the economy requires spending which employs workers which pays taxes. Who are the spenders going to be going forward?

The nation’s gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960. At the same time, the jump in postwar births, known as the “baby boom,” increased the number of consumers which in turn created more spending. More and more Americans joined the middle class. But we aren’t living in the same time period. In the 1950’s and 1960’s most families had a house, a car, and one wage earner. Just try that today.

Our current National Debt is in the stratosphere, growing every second, with no signs of stopping and no plans for repayment. The higher it gets the higher percentage of income (tax dollars) are needed just to pay the interest. For a precursor, just look at a few European countries such as Greece and Italy.

I really don’t know what will actually trigger this but my bet would be on a stock market correction. Many pensions are currently underfunded and when asset values drop (401K, IRA savings) consumers stop spending. I really hope someone can open the publics eyes and come up with a solution. I for one am out of the stock market. To be continued… Please comment with your thoughts.